Assume on January 1, 2015, a parent company a 75% interest in a subsidiary's voting common stock. Onthe date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. OnJanuary 1, 2017, the subsidiary purchased a building for $576,000. The building has a useful life of 8 yearsand is depreciated on a straight-line basis with no salvage value. On January 1, 2019, the subsidiary soldthe building to the parent for $504,000. The parent estimated that the building has a six year remaininguseful life and no salvage value. The parent also uses the straight-line method of amortization. For the yearending December 31, 2019, the parent's "stand-alone" income (i.e., net income before recording anyadjustments related to pre-consolidation investment accounting) is $600,000. The subsidiary's recordednet income is $120,000. Income from Equity investment (on parent's pre-consolidations books precedingconsolidation): $45,000 $102,000 $90,000 $30,000

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Description: Assume on January 1, 2015, a parent company a 75% interest in a subsidiary's voting common stock. Onthe date of acquisition, the fair value of the subsidiary's net assets equaled their reported book values. OnJanuary 1, 2017, the subsidiary purchase

Equity investment refers to making an investment in another company by purchasing a share of that…

Answered: net income is $120,000. Income from…

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net income is $120,000. Income from Equity investment (on parent's pre-consolidations books preceding consolidation): $45,000 $102,000 $90,000 $30,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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